There's one huge problem: CSU is not budging on McElwain's $7.5 million buyout, and Florida refuses to pay the entire amount, sources said Wednesday night.
"At this point, any potential deal is on hold until there's some sort of resolution with the buyout issue," a source said.
If Colorado State president Tony Frank doesn't agree to a lower buyout, Florida officials are "pessimistic" the deal will get done, sources said.
Florida athletic director Jeremy Foley and UF administrators flew to Fort Collins on Tuesday under the impression that there were provisions in McElwain's contract that would allow him to leave for a lower buyout.
However, Frank -- the only individual who's allowed to reduce the buyout -- refuses to accept anything less than the $7.5 million amount, sources said.
Florida targeted McElwain to replace Will Muschamp after Foley was led to believe the buyout could be reduced, sources said.
McElwain's contract states that "in the case or event of extenuating circumstances the University's President shall have the discretion, but not the obligation, to reduce in whole or in part McElwain's buyout obligation to pay [the buyout to CSU]. McElwain shall have the right to request that the Parties engage in a good faith discussion of such Liquidated Damages amount prior to McElwain providing formal notice to the University of his decision to terminate this Agreement without cause, and in such event the University agrees to engage in such discussion, although the University has no obligation to reduce in whole or in part McElwain's obligation to pay Liquidated Damages."
During a June 6 meeting with McElwain's representatives, Frank agreed to reduce or eliminate the buyout if McElwain were offered a "once in a lifetime"-type job, a source told ESPN. There were five individuals in the room when the agreement was struck, including former athletic director Jack Graham, who drew up the 10-year, $15 million contract for McElwain.
Graham confirmed to The Coloradoan on Tuesday that during McElwain's contract negotiations, Frank agreed to "reduce if not eliminate the breakup fee" should McElwain have a chance to leave for a "dream job." Graham told the newspaper he disagreed with the decision since it eliminated the purpose of the buyout.
Frank fired Graham on Aug. 9 because of irreconcilable differences of opinion over the direction of the department.
Frank apparently will now not accept a lesser amount, and the Gators also must pay about $6 million for the remainder of Muschamp's contract.
UF officials met with McElwain and his wife, Karen, at their residence in Fort Collins for two days before returning to Gainesville, Florida, on Wednesday night.
Foley said talks went well with the McElwains.
"We've had very productive conversations with Coach McElwain and his wife Karen and those continue," Foley said through the school's Twitter account.
Nebraska also has shown serious interest in McElwain, and there are indications Michigan would pursue him, sources said.
McElwain is 22-16 in three seasons at Colorado State, including 10-2 this year. The Rams were one of two Group of 5 teams with victories this season over two Power 5 conference teams, defeating Colorado and Boston College.
Named the Mountain West Conference's coach of the year Tuesday, McElwain has turned the Rams into an offensive powerhouse. Colorado State averages 498 yards per game (13th-best in the nation) while boasting the nation's second most efficient quarterback in Garrett Grayson and the top receiver by yards per game (149.1) and touchdowns (17) in Rashard Higgins.
Before taking over Colorado State, McElwain, a Montana native, was Alabama's offensive coordinator and quarterbacks coach from 2008 to 2011.
The Gators are looking for a replacement for Muschamp, who was fired last month. The Gators are 6-5 this season, and a program that grew accustomed to putting points on the board ranked 90th this season in total offense, which is Florida's best mark during Muschamp's tenure.